Stein v. Pulaski Furniture Corporation, Civ. A. No. 1181.

• Decision Date: 24 April 1963
• Docket Number: Civ. A. No. 1181.
• Citation: 217 F. Supp. 587
• Parties: Samuel J. STEIN, Plaintiff, v. PULASKI FURNITURE CORPORATION and Morris Novelty Furniture Corporation, Defendants.
• Court: U.S. District Court — Western District of Virginia

217 F. Supp. 587

Samuel J. STEIN, Plaintiff, v. PULASKI FURNITURE CORPORATION and Morris Novelty Furniture Corporation, Defendants.

Civ. A. No. 1181.

United States District Court W. D. Virginia, Roanoke Division.

April 24, 1963.

E. Griffith Dodson, Jr., Roanoke, Va., for Samuel J. Stein.

E. Milton Farley, III, Richmond, Va., for Pulaski Furniture Corp.

M. H. MacBryde, Jr., Martinsville, Va., for Morris Novelty Furniture Corp.

MICHIE, District Judge.

The defendants in this case have filed answers which include the affirmative defense of the statute of frauds. All the parties have stipulated that the alleged contract, upon which the action is based, was, if ever made at all which the defendants do not admit, an oral contract made in North Carolina for a five-year period of employment and that no written memorandum was made relating to that contract. Since no proof is needed to establish the above admitted facts, a question of law is raised as to the effect of Va.Code § 11-2 which reads, insofar as material, as follows:

"When written evidence required to maintain action.—

"No action shall be brought in any of the following cases:

* * * * * *

(7) Upon any agreement that is not to be performed within a year;

"Unless the promise, contract, agreement, representation, assurance, or ratification, or some memorandum or note thereof, be in writing and signed by the party to be charged thereby, or his agent; but the consideration need not be set forth or expressed in the writing, and it may be proved (where a consideration is necessary) by other evidence."

At the outset it should be noted that no provision in North Carolina's statute of frauds (Gen.Statutes of N.C. § 22-1 et seq. 1943) relates to contracts not to be performed within a year, and that therefore, assuming no other legal imperfections, the oral contract was valid and enforceable under the laws and in the courts of North Carolina.

It is also true that under well-accepted principles the formal validity of a contract is normally determined by the law of the place where the contract was made. Scudder v. Union National Bank, 91 U.S. 406, 23 L.Ed. 245 (1875); 4 Michie's Jurisprudence, "Conflict of Laws", § 21, p. 53. However, when a contract action is brought in another forum, it must be litigated under the procedural (or "remedial") rules of that forum. Hogue-Kellogg Co. v. G. L. Webster Canning Co., 22 F.2d 384 (4 Cir. 1927).

The question before this court, then, is whether the above quoted Virginia statute is procedural or remedial in nature or whether it is concerned with the substantive validity of oral contracts. Put in another way, the problem is whether the statute proclaims oral contracts which fall within its scope merely unenforceable by the court machinery of the state of Virginia or whether it is saying that such contracts are void ab initio and of no effect wherever suit may be brought upon them.

Even though the statute is found to be procedural the laws of Virginia must be applied rather than any federal rule of procedure since the decision of this question will "significantly affect the result of" this litigation. Guaranty Trust Company of New York v. York, 326 U.S. 99, 109, 65 S.Ct. 1464, 89 L.Ed. 2079; Macias v. Klein, 3 Cir., 203 F.2d 205.

Without going into too much background, it may be said, briefly, that the problem before the court had its origin in the English Statute of Frauds and the case of Leroux v. Brown, 12 C.B. 801 (1852). In that case the court drew a distinction between § 4 of the English statute (which contained the expression: "no action shall be brought" and upon which § 11-2 of the Virginia statute is based) and § 17 of the English statute (which contained the expression: "no contract * * * shall be allowed to be good") and held that § 4 was procedural or remedial in nature and would bar the enforcement in English courts of an oral contract not to be performed within a year even though that contract was perfectly valid and enforceable in France where it was made. Since many states in this country have adopted the English statute in whole or in part, some including only § 4 or § 17 and some both, and since the logic behind the Leroux distinction is somewhat questionable when examined closely in the light of the purpose of the statute of frauds (see Lams et ux. v. F. H. Smith Co., 6 W.W.Harr. 477, 36 Del. 477, 178 A. 651, 105 A.L.R. 646 (Del.1935)), a mass of contradictory legal precedent and scholarship has developed relating to this question (see Lams et ux. v. F. H. Smith Co., supra, and Judge Parker's dissenting opinion in Simmons Co. et al. v. Crew et al., 84 F.2d 82 (4th Cir. 1936), in which the majority of the court did not think it necessary to reach the statute of frauds question, for exhaustive citations on this point). Unfortunately there is apparently no direct precedent in Virginia upon which a holding may be based.

Counsel for the defendants have argued that the General Assembly of Virginia has seen fit to incorporate both § 4 and § 17 of the English statute into the present Virginia Code as § 11-2 ("No action shall be brought * * *") and § 11-1¹ ("Every contract * * * shall be void * * *") respectively and that this court must respect the mandate which this legislatively preserved distinction of language represents. In the absence of a case from Virginia's Supreme Court of Appeals on the question it seems necessary to examine the history of the Virginia sections to see if it throws any light on the legislative intent.

But when the history of these statutes is traced back through the years to their origins it becomes apparent that § 11-1 is not directly related to § 17 of the English Statute of Frauds, but was enacted in 1887 to rectify an odd development in Virginia's recording laws which had put a purchaser of land under an unrecorded oral contract in a stronger position than a purchaser of land under an unrecorded written contract. Floyd v. Harding et al., 28 Grat. 401 (1877). Under the Floyd case, supra, a purchaser of land under an unrecorded oral contract could get title good against all the world through the equitable doctrine of part performance, while all written contracts for the sale of land had to be recorded or be "void as to creditors and subsequent purchasers for valuable consideration without notice" (Chap. 118, § 5 Va.Code of 1849). The object of § 11-1's predecessor (§ 2463 of the Code of 1887) was to abrogate the Floyd holding and place a purchaser of land under an unrecorded parol contract, as to purchasers for value without notice and creditors, in the same situation as a purchaser under a writing who had failed to record it under the recording acts. Norfolk & Portsmouth Traction Co. v. C. B. White & Bros., 113 Va. 102, 73 S.E. 467 (1912). Clearly this provision is not a successor to § 17 of the English Statute of Frauds. And in fact, although the word "void" is used in § 11-1 the contract is not...